At certain positions the windmill will be blocked and you won't be able to turn it one way, or raise/lower it. Try turning in the opposite direction, or hopefully you saved your game just prior to starting this puzzle, so you can replay?
From ronrob's walkthrough:
The lever on the left is used to adjust the height of the windmill to one of three positions. The center yellow button turns the windmill clockwise, and the right yellow button turns the windmill counterclockwise.
Here's one solution:
Begin with the windmill facing to the left, due west, and at its lowest position (left lever all the way up). This is fairly easily accomplished. Now do the following:
1. Press the right button twice.
2. Lower the left lever once.
3. Press the right button once.
The windmill, now facing into the wind and at the middle height, starts turning.
